Lost Between the State and Market

Abstract

Over the years, a number of studies have examined the economic miracle that began in Japan in the late 1950s, quickly spread to Hong Kong, Singapore, South Korea, and Taiwan, and has now become generalized across Indonesia, Malaysia, Thailand, Vietnam, and mainland China. Using complementary and competing conceptual and methodological frameworks, analysts have examined in painstaking detail the political economy of these countries, which the World Bank (1993) has aptly labeled the Asian economies. In particular, scholars have sought to explain their exemplary economic performance that seems so starkly at variance with the performance of most developing and postcommunist countries. Do they constitute an Asian developmental model? Is that model replicable, and what lessons can other late developers learn from it? Thanks to this exhaustive scholarship, we now have a more nuanced understanding of these questions. Recent works by Alwyn Young (1995), Jose Campos and Hilton Root (1996), Susan Collins and Barry Bosworth (1996), along with studies reflecting the new institutional economics paradigm (Kang 1995), have significantly moved beyond the stale state versus market debate to provide provocative and insightful empirical and conceptual insights. Unfortunately, in this context Comparing Development Patterns in Asia, by Cal Clark and K. C. Roy, cannot be considered a pathbreaking work. What this book does reasonably well (albeit repetitively) is provide a coherent summary of the hashed-over debates on East Asian development and their implications for other countries. It adds little to existing knowledge. For example, a large portion of the book is devoted to a wide-ranging critique of the neoclassical perspective and a quasi defense of statist models. Yet, the critique lacks the sophistication and balanced interpretations found elsewhere. Indeed, none of the recent works cited above are mentioned in Clark and Roy's rather extensive bibliography. If the authors had consulted at least one of these studies, they would have had to modify their rather simplistic critique of neoclassical models. In effect, they would have had to come to terms with the increasing cross-national evidence that vindicates important neoclassical claims regarding East Asian development. Specifically, the evidence shows that the economies of South Korea, Singapore, Taiwan (and now those of a number of Southeast Asian countries as well) did take off' by following consistent and coherent market-conforming policies. These included selective trade and import liberalization, prudent devaluation, tax and financial market reforms, flexible labor markets, a pragmatic stance toward foreign direct investment, and a willingness to allow international market forces to determine price relativities-including exchange rate adjustments. These package policies enabled these high-performing economies to offset externalities, ensuring that